Tuesday, July 09, 2013

Michael Lind's mercantilist critique

Michael Lind's article, "Econ 101 is killing America", is not very cohesive, and it contains a number of big mistakes, both about the content of Econ 101 and about the advice economists give to policymakers.

For example, since when does Econ 101 teach that static efficiency (i.e. efficiency today) is more important than dynamic efficiency (i.e. efficiency across all time)? It doesn't. Lind's point #2 is just wrong. And since when does Econ 101 say that everything in the economy is determined by markets? It doesn't! Government spending is a big deal in Econ 101. So Lind's point #3 is just wrong. And since when does Econ 101 ignore externalities? It doesn't. So Lind's point #5 is just wrong. And not only does Econ 101 not actually teach these things, but no economic policy advisor worth 2 cents would give policy advice based on these things.

Anyway, with that out of the way, let me say that I think Lind's article, scattershot and often mistaken as it is, makes a substantial and important point. So yes, this is a (partial) defense of Lind.

Lind's points #6, 8, 9, and 10 can be paraphrased as follows:

6. Econ 101 ignores the research activities of monopolies.

8. Econ 101 says that industrial policy is always bad, when in fact it is often good.

9. Econ 101 says that tax-based industrial policy is always bad, when in fact it is often good.

10. Econ 101 says free trade is always a win-win, when in fact one party often loses out from trade.

These four points are fair descriptions of what Econ 101 teaches. Econ 101 teaches that monopolies can be good, but only because their activities contain negative externalities, so that the restrictions on activity from a monopoly work against the externality. Econ 101 doesn't have much to say about industrial policy, other than one-paragraph outlines of some classic arguments in favor of it ("strategic industries", "infant industries", and so on). And Econ 101 definitely teaches that free trade always can, with appropriate transfers, be beneficial for all.

And from the anecdotal evidence I've seen, a large majority of economists give policy advice that is closely in accordance with these Econ 101 teachings. They advise against allowing monopolies, against industrial policy, and against restrictions on international trade. Free trade is often cited as "the one thing economists can agree on".

Lind's main critique, after we strip away the canards, is therefore a mercantilist critique. It's not a Keynesian, or leftist, or post-Keynesian, or Austrian critique. It's not really about the recent crisis. It's not about business cycles, financial instability, stabilization policy, quantitative easing, or fiscal stimulus. It's not about redistribution, fairness, poverty, etc. It's about long-term growth. Lind is arguing that mercantilists know something that we don't about how to make a country grow and prosper in the long term. He is arguing that by uniting against industrial policy and strategic trade policy, economists have doomed our country to subpar growth.

I'm a lot more sympathetic to mercantilism than most economists I've met, but I don't think Lind has convincing evidence that mercantilism works. Nevertheless, I think Lind makes a good point. Economists ' public arguments against mercantilism overwhelmingly draw on simple Econ 101 theories and concepts. This puts defenders of mercantilism at an unfair disadvantage; the arguments against mercantilism will be a lot simpler from the arguments in favor, but simplicity does not equal correctness.

And as I've argued before, I think non-economists grasp this very quickly and intuitively. Most people have instinctive sympathy for mercantilism, and they can smell the oversimplification in economists' arguments against it. They know that every country that ever got rich was fairly or extremely mercantilist during its period of rapid growth. So "the one thing economists can agree on" becomes "the one thing economists and the public disagree about most". Michael Lind is really making the everyman's case against the econ profession. And he's not a solitary voice, either; Edward Luce's recent book, Time to Start Thinking, made many of the same points.

So whether Lind is right or wrong on the substance, economists should think twice before jeering and dismissing him. Lind's mercantilist critique is quite representative of the doubts that many, many people have about economists and economics.

48 comments:

Shouldn't there be a distinction between mainstream economics and mainstream economic models? Because I think the former is a lot more tolerant to research and monopoly if for nothing else than the fact that formalizing R&D benefits from imperfect markets is not... easy?

Anyway, I don't see why doubts "most people have" about economics should be any more relevant to policymaking than doubts "most people have" about cell towers causing cancer or nuclear plants being dangerous should be to urban planners.

Or god forbid letting children in many parts of the US be educated on what "most people" believe to be the truth about evolution.

I'd put the expert consensus this way. Trade seems to be an area where economists of all stripes are equally willing to settle for theoretical evidence rather than more rigorous empirical study. (Everywhere else Keynesians use theory for one thing and empirics for another and you know the story).

It seems economists have a very strong prior on the microfoundations behind trade and that is what seems to me is dangerous.

I don't think we should care about the majoritarian view on expert consensus. What is troubling is the *expert view on expert consensus*. Physicists and climatologists have a right to be confident (and even they show more doubt and skepticism than most economists) because microfoundations are very clear, unlike economics.

But I don't know what any of this has to do with Robert Atkinson's Michael Lind's critique which should be 100x more sophisticated and nuanced than it is. Applied meta it burns down.

I've begun to argue that the "classical" (Ricardian) exposition of comparative advantage and the gains from trade is essentially a *static* argument, depending on pre-existing resource endowments (labor, capital, and natural resources) that are also enduring. But one of the points about economic growth is that it leads to (or arises from, take your pick) *changes* in comparatie advantage.

And there's alwyas Krugman's increasing returns to scale model for international trade that does not rely much, if at all, on comparative advantage...

"For example, since when does Econ 101 teach that static efficiency (i.e. efficiency today) is more important than dynamic efficiency (i.e. efficiency across all time)? It doesn't. Lind's point #2 is just wrong. And since when does Econ 101 say that everything in the economy is determined by markets? It doesn't! Government spending is a big deal in Econ 101. So Lind's point #3 is just wrong. And since when does Econ 101 ignore externalities? It doesn't."

You must have taken a different Econ 101 class than I did. Every single one of these points are perfect descriptions of my Econ 101 class.

Do you think you understand the diversity of Econ 101 courses out there? There are many topics which can be covered. Only someone in a bubble would assume all of the "right" topics are covered. My prof was a solid libertarian, so I got a certain flavor of Econ 101. As I said, you mileage may vary.

I've moved on this position a bit, so I think industrial policy can help if you can somehow apply discipline to the firms you're supporting in the industrialization process - several of the East Asian countries that moved into First World status did this by making them export, and by the usual process of importing as much technology and knowledge on as favorable terms as possible. Don't supply discipline, and you just get ISI with all its crappiness and cronyism.

Of course, that just industrializes you. Nobody knows what a good "Service Sector Policy" is yet, because any country worrying about it is at the technological frontier. Industrial policy and its ilk is usually about playing catch-up. It doesn't help that the services sector is getting its own transformation now in terms of "add machines to make it go better".

The Lind article could definitely be better written. He could have done "Industrial policy can be good" in a single article, but instead he padded it out to three different points that use similar case examples in Points 8,9, and 10.

Another thing about the truth of this. I think you are reading "Econ 101" too literally. Really what this means is the intro people get to economics, regardless of whether it is in the Econ 101 class or some other source. Look at what is being taught in business or law schools as an intro to Econ. This synopsis is actually pretty accurate of what people get in classes where the main course is X and the econ comes as a side order. The naive econ view gives a deceptively simple framework on which to hang a lot of rules in business and the law. And so the naive econ view makes it into the framework of areas where it does not belong.

Lind indicates at the outset that he's not talking about the typical teachings of an "Econ 101" academic course , but rather the bastardized revision of such that dominates in the mainstream debate of the issues :

".....even though most economists know better, they present to the public, the media and politicians a simplified, vulgar version of neoclassical economics — what can be called Econ 101 — that leads policymakers astray. "

For me mercantilism wasn't about protectionism, but about bullion, monopolies and colonization (a captive market and a source of cheap commodities) and tariffs were means to attain more bullion, power for monopolies and grab more colonies so that the wealth of the captive population be transferred to the colonizing.

It all does sense - making the money supply suddenly drop causes depression, monopolies were the dominant economic institution at a time when competition was wars between states and robbing less developed countries is sinister, but does increase income (colonies aren't profitable if you don't exploit their population or import slaves to work their natural resources or both).

Yeah, one could think of "Econ 101" as optimal policy given that there is no coercion. Economists typically frame their arguments too often in terms of "this policy is the best for all people all the time." For example, a policy everybody agrees is horrible, rent control, could be quite good for the renter at the time it's enacted and who has no plans for moving. Even with a competitive market expanding supply of housing for population-growing areas, the current renter still gets a lower price than the resulting competitive price due to the upward-sloping supply curve.

Reading the subtexts of many arguments, the "beggar-thy-neighbor" nature is not that hard to see. In the past, like you say, Mercantilism would just go ahead and force the other population to give up gold or natural resources. Today, arguments are made in a vacuum to, say, put up artificially high barriers of entry to certain occupations. The assumption at the time is that the price of all other goods will remain the same, but unlike Mercantilism all other occupations are also free to put up high barriers to entry.

I think that people are capable of understanding such nuance in the economic models and it would help sharpen the debate for free market mechanisms. Yes, things would be nice for you if your rent never increased or, if you own, to constrain supply, but that's also nice for everybody else who rents or owns. If you happen to move or if your children or parents want to find a place, you or their living standards will be far worse due to such policies.

Correction: there is a third way colonies are profitable. If they provide a place to export unwanted excess population, it doesn't really matter whether they make a profit any other way. Think "sending the prisoners to Australia".

This is a problem which would be better addressed with widely available birth control, of course.

This just doesn't make any sense. My Econ 101 was definitely not so normative. If Econ 101 really were so normative, saying that "x is always better than y" or "z is always bad", then yes, it would be preposterously stupid. And if the moon were made of green cheese, I'd be able to jump 100 miles in the air.

Obviously, every policy, from jaywalking prohibitions to free trade, has winners and losers, and these winners and losers change intertemporally. Let me clue Lind in. Each policy is generally better for the winners and worse for the losers, but there is no "this is always good for everyone" or "this is always bad for everyone" (especially in generational considerations). So, yes, if Lind is correct in profiling Econ 101 this way, then there is a real problem.

Of course, I took Econ 101, and I believe almost none of the things he lists (and perhaps more importantly, I remember being taught none of these normative conclusions). In fact, the most important lesson I remember from Econ 101 was the concept of externalities. A lot of people disregard externalities, but I generally don't think it's people teaching Econ 101. The concept of externalities blows apart the simplistic "no regulation" free markets ideology that, to me, is one of the biggest curses of humanity.

<"But even more problematic, even though most economists know better, they present to the public, the media and politicians a simplified, vulgar version of neoclassical economics — what can be called Econ 101 — that leads policymakers astray."

It's poor word choice on his part (and that of Salon) to call this Econ 101.>

If you have the pleasure (more torture) of ever engaging a libertarian in debate on an internet forum, you'll get what he's talking about. Sure, externalities & network effects might be covered in Econ 101 (barely gloassed over, rather, in the class I took, even though I think they should be the 2 dominant areas of inqury in micro these days), they don't factor at all in to the thinking of the typical glibertarian, and those people form a big chunk of the US voting public.

My Econ 101 and 102... well, the professors were fine, but the *curriculum* was *garbage*. It really did suffer all the flaws which Lind describes, and more. Did I mention that *deflation was not covered*?

Of course, it used Mankiw's book (which I have since burned). In order to learn anything I had to spend my time asking the professor questions after class.

It got better when I took an advanced undergrad course, because then the professors were allowed to say what they really thought.

Econ 101 is often used to make half arguments in favor of whatever the speaker is in favor of and against whatever the the speaker is against. That may be more a problem with the proponent than the subject, but it is the most commonly abused argument in this manner. Farm subsidies damaging foreign producers rather than benefiting foreign consumers is a common one. Taxes as always bad is another.

Here's the sentence where Lind makes clear as mud that he's not talking about the college-level formal introduction to economics.

"But even more problematic, even though most economists know better, they present to the public, the media and politicians a simplified, vulgar version of neoclassical economics — what can be called Econ 101 — that leads policymakers astray."

It's poor word choice on his part (and that of Salon) to call this Econ 101.

Kudos to you Noah for your open-minded approach. Unless there are other arguments I'm unaware of, the arguments against free trade are essentially the same arguments as those for industrial policy.

The benefits of well-executed industrial policy are analogous to the benefits of a well-executed legal/regulatory regime. In fact, I expect that the benefits of industrial policy simply come from the failings of the legal/regulatory regime. If large externalities go unpriced (e.g. R&D, pollution, trade displacement) then there is a possibility for beneficial direct intervention via industrial policy.

I doubt that these benefits can be reliably captured, so I tend to remain skeptical of industrial policy generally; I similarly doubt that externalities can be reliably priced appropriately by regulators, so I tend to favor special economic zones and similar regime diversity (ala Paul Romer).

The quibbling in the comments over what is meant by "Econ 101" is a distinction without a difference, as far as I can tell. The general public's view of econ 101 is actually strikingly similar to the view you get by reading even a thoughtful and balanced textbook. I'm a non-economist, I've just taught myself "econ 101" using Krugman's textbook, and I've been surprised by how much his textbook, which really tries to point out that there are issues with an overly simplistic economist's view of the world, nevertheless is basically presenting that very view. The textbook will have chapter after chapter talking about efficiency and deadweight loss and "perfectly competitive" markets (in which no firm earns a profit!) and so on, and then it has a couple of pages about externalities or other possible reasons for government interventions. It's clear that the main things the book is teaching are that markets are efficient and produce the most utility and that government intervention, regulation and taxes are all inefficient.

I think Noah does a good job here of speaking up for us interested but skeptical non-economists. He's right: we look around and see economists talking nonstop about the inefficiency of taxes (econ 101!) and the beauty of free trade, and yet it's obvious to us that the US's period of highest growth was when the marginal income tax was super high, and it's obvious to us that the world's most remarkable economic success story over the past couple of decades has been a country with a very, very heavy governmental hand, a country that limits free trade in all sorts of ways! (It's funny: some see China as a country that liberalized and so succeeded; others see it as a country that reined in the free market in all sorts of ways and so succeeded!) Anyway, thanks for the post.

This is a brilliant comment. Most econ profs don't have a degree in education philosophy, but perhaps they should.

Spending an enormous amount of time delving into intricate models of a perfect competitive market, then mentioning that this conception is based on five conditions--conditions that almost never exist--is not the rounded picture some suggest--at least not for those doing the learning.

Imagine if Econ 101 started with one week focused on the best, most detailed description of the basics (supply and demand, price floor and ceilings, elasticity) that you could fit into three 50 minute lectures, then--instead of delving further into the details of perfectly competitive model spent the entire rest of the course dealing exceptions to the normal rule--not just monopolies, but actual models of monopolistic and oligopolistic markets; what happens when Adam Smith's five assumptions don't hold; market power; externalities; cluster effects; network effects; first mover advantage.

In other words, what if profs made these exceptions the main subject of the Econ 101 course? Wouldn't that make sense since in the real world it's these exceptions that dominate and the "perfectly competitive marketplace" that is actually rare?

I'd also like to see an "Intro to Microeconomics" course which, after discussing "price makers" vs. "price takers" (monopsony and monopoly, the two common situations), starts right off with product differentiation and advertising, the main things which firms actually think about.

If Lind had just used a phrase like "econ common knowledge" instead of econ 101 it would have read much better.

In his defence he did alert the reader that he was going to use econ 101 as a short hand for stuff that is really not econ 101. I mean it shouldn't be implied that he did not realize that he was using "econ 101" loosely.

I've used "econ 101" myself to describe the half-assed simplistic economics often trotted out by libertarians and conservatives to defend laissez-faire policies. Often *smugly* trotted out, with assertions that only they understand economics and that economics leads to libertarians, even while ignoring things like externalities, never mined Keynes.

I didn't learn about externalities until intermediate, which was a gargantuan mistake, as only a tiny percentage of students ever go on to intermediate, and externalities are one of the most important things in economics. People can support incredibly harmful and inefficient policies due to not understanding externelities. Indeed, we have an entire major party dedicated to willfully not understanding that externalities exist.

I took econ 101 about a decade ago. Externalities were mentioned in a single lecture on a day the professor was absent and a TA was teaching. It did not appear in any homework or tests. So, progress I guess!

I have come to the conclusion that learning a little bit about economics leaves you less well prepared to understand the world we live in than learning none at all.

Extrenalities are the single most important thing in economics today (because the environment is by far the most important issue today).

And no, they aren't taught in Econ 101 or Econ 102. Econ 101 material is pretty much bullshit through and through -- though I think the micro is worse than the macro -- and they don't even draw their graphs with the independent variable in the correct places. ;-)

The micro is disastrously broken; the "Econ 101" model of the firm is a joke, omitting everything important about the behavior of firms, from advertising to product differentiation.

Basically "Econ 101" is a model of coal mines, nothing more -- and a model of coal mines with no externalities, which is exceptionally dreadful.

I took Econ 101 way back in the late 70's from whatever edition of Samuelson was used back then - along with Econ 102, and intermediate macro and micro. I often find myself drawing on arguments that I learned back in Econ 101 and 102, but using them against what I gather to be the Econ 101 and 102 of the intervening period. It's only my impression, because I don't really know what they teach in Econ 101 and 102 these days. All I can say is that a lot of people younger than me seem to come out of those courses with much more favorable attitudes toward markets and private enterprise than I came away with from my intro courses, and have learned a whole new barrage of anti-government arguments.

The picture I was given in ye olden days was that all of the civilized countries in the world had one version or another of a "mixed economy" which avoided the manifold problems of economies that relied either too much on markets and private enterprise or too much on state command.

By the way, I'm very keen on reading Mariana Mazzucato's new book The Entrepreneurial State. What I've read by her before squares very much with my own instincts.

I don't think Lind wrote carefully, and I have no interest in defending him. All the same, the messaging of Econ 101 depends on its framing, not its detailed content. Externalities, for instance, are there in the textbook, but they are an add-on. The frame is a vision in which they don't exist. A sophisticated economist will say, the point of the frame is to give us something to compare the real world to. The student reading the textbook remembers the frame and forgets the rest.

Re point 2, you are both right and wrong. Right because investment decisions do of course consider future production, and optimisation includes optimisation over time based on expectations. But wrong in that traditionally economics uses a comparitive static framework not a truly dynamic one. In particular, I worry about about trade models that don't worry enough about potential productivity growth in recommending specialisation (behaps because they exclude costs of adjustment in their calculations).

"So whether Lind is right or wrong on the substance, economists should think twice before jeering and dismissing him. Lind's mercantilist critique is quite representative of the doubts that many, many people have about economists and economics."

OK, I'm confused. In some places, you seem to argue that mercantilist thinking is worth a look because it represents reality in some sense. In other places, you point out that regular folk seem to realize that mercantilism has a record of success. Those are related points, but different nonetheless. When you wrap up, you want economists to care about Lind's point not because he has a point - or because he misses the point, but in the process of getting everything wrong, draws our attention to some things that are right - but rather because a bunch of people think the way he does.

Where exactly are we? If Lind is wrong but saying things a lot of people think, then he is in a class with gold-bugs and alien-abduction types. That's all the more reason to bury him in criticism. If economists are wrong to dismiss mercantilism are roundly as they do, but Lind is not a very good guide to why that is true, that's all the more reason to ignore him and repeat your own arguments about why mercantilism isn't as stinky as Econ 101 claims.

I, too, am more sympathetic to mercantilism than most economists I know, but I thought Lind's piece was kind of a trainwreck.

I'll preface this with two points: (1) As others have noted, Econ 101 comes in a lot of different flavors both across departments and within departments. The lecturer matters. And (2) having my degree from FSU, I was mostly subjected to very right-wing professors at the intro level (less so in higher-level coursework).

So my criticism here is entirely based on my experience as an undergrad years ago:

Myth 1 actually gains some sympathy with me, although I think the problem in economics is more about a lack of data and a failure to purge political asshats than anything. The correct answer on the minimum wage survey, per the literature (as I recall) is "Disagree" on that survey. The survey asks if raising the wage would "noticeably" hurt low-wage workers. The papers I've seen suggest the impact is incredibly small one way or the other and probably statistically insignificant.

Myth 2 is completely wrong. The goal of economic policy is to achieve the political aims of officials. Whether or not those aims are efficient is an empirical question. Whether any inefficiency is justified by the ends is a matter of opinion.

Myth 3 is nonsense. Government is no less a market player than firms, households, banks, investors, etc. An economy is the sums of its markets, and all market players matter.

Myth 4 seems to me to misstate the EMH. And the fact that Bernanke and Greenspan didn't see the housing bubble for what it was doesn't imply that all economists failed to see it. As you've noted, many -- Baker, Roubini, etc -- did. I think Bernanke and Greenspan's collective failure is as much a reflection of the Washington bubble as it is a failure of economics.

Myth 5 is an extension of the Economics As Morality Play fallacy. Profits, losses, assets, liabilities, etc, are not "good" or "bad". Also, for someone getting all judgy about what is and is not science, the straw man about Adam Smith "proving" something is somewhat amusing.

Myth 6 is nonsense. There's good and bad in both, just as there is in perfect competition. Higher prices may well be a good thing if, say, consumers have access to differentiated products. I'm willing to pay a bit more for a vehicle to have the choice of a Camaro or a Jeep, or a bit more for a computer so I can choose between a Mac and a PC.

Myth 7 is, again, nonsense. Maybe Lind ought to go read some Stiglitz. I don't dispute that people at Cato say this, but the Cato Institute isn't what I would consider a good representative agent for economists.

Myth 8 has some merit. Generally it was presented as theoretically workable, but that economists were skeptical of the ability of governments to make smart choices on which industries and companies to support.

Myth 9 is just Myth 8 in another form.

Myth 10 also probably has some merit. I don't think we even did trade theory in Econ 101. It was a different class. And in international trade and intermediate macro, we did actually study the simplistic comparative/competitive advantage stuff, and then moved on to real-world complexity.

"So whether Lind is right or wrong on the substance, economists should think twice before jeering and dismissing him. Lind's mercantilist critique is quite representative of the doubts that many, many people have about economists and economics."

I completely agree with this. Much of the animosity directed at economists by the public is well-deserved. As I noted above in my response to Myth 1, we've failed to purge economists who are more interested in playing politics than in giving the public the right answer.

There are economists around with pretty good answers -- the New Keynesians and Post Keynesians/MMTers are pretty good, IMO -- but asking the guy on the street to differentiate the serious economists from the clowns is even more challenging than asking them to differentiate serious climatologists from that field's group of clowns.

" I don't see why doubts "most people have" about economics should be any more relevant to policymaking than doubts "most people have" about cell towers causing cancer or nuclear plants being dangerous should be to urban planners."

No.

By guiding and justifying policy in this country that has resulted in a seriously damaged and shrinking middle and working class, with a corresponding huge increase in wealth and income for the top 1%, mainstream economics has had a pernicious effect on the lives and hopes of all non-wealthy Americans. This has damaged democracy itself.

Lind's ideas and other heterodox ideas should be listened to with respect - with a focus on revising conventional thinking, not defending it. Also those who have upheld conventional thinking should apologize and withdraw. If they don't the whole profession will lose credibility. We are a democracy not a monarchy.

I think Lind's piece is a bit sloppy and all over the place, but this is a bizarre criticism from Smith.

Econ 101 courses and texts certainly do not focus on endogenous growth (#2), externalities (#3) or the nature of government spending (#5) (as opposed to treating it as a simplified blackbox). An undergraduate program in economics would cover all these topics and more, but not a single course.

Even if that isn't Noah's or anyone else's experience, Lind's makes it very clear that he's using the phrase "Econ 101" to describe the persistent bias that many economic thinkers have towards considering as a perfectly competitive and frictionless marketplace. This is indeed a big problem.

It's disingenuous of Lind if he is using "ECON 101" as a shorthand for what policymakers think economists think. It's as if he knows that his assertions about what economists teach can be refuted by referencing actual, you know, ECON 101 texts, and he wants a way to wriggle out of being shown wrong- "oh I just meant the vulgar version of what is taught".

BTW my principles of macro text does cover endogenous growth and does reference externalities (it's a macro text not a micro text after all.) And ALL principles of micro texts have chapters on monopoly and oligopoly, and a lot of material on externalities.

Policymakers are too laissez-faire on trade!? Are you kidding me? The NAFTA "free-trade" agreement has hundreds of pages of limits, rules, exemptions, provisions for protecting particular industries. And the USA may not have an official industrial policy but in effect it protects and subsidizes legions of favored firms and industries!

"Most people have instinctive sympathy for mercantilism, and they can smell the oversimplification in economists' arguments against it. They know that every country that ever got rich was fairly or extremely mercantilist during its period of rapid growth. "

That's enough to prove that mercantilism works, to scientific standards.

Correlation doesn't prove causation, but when the correlation is that strong, anyone claiming that mercantilism doesn't work has a *huge* pile of evidence to overcome and explain away, and nobody has ever satisfactorily explained it away. The *Occam's Razor* conclusion is that mercantilism works.

I would say that it's possible to do mercantilism badly: to focus on an export industry which your country is objectively crap at, for instance. Growing the wrong sort of plants for your climate, stuff like that. But if you're not an idiot, mercantilism works.

The thing that always draws people to Smith's economics is the ideal of broad humanist cooperation developing the world into a place where borders are irrelevant and conflict is irrational. That's in contrast to mercantilist notions of economics being essentially zero-sum and competitive.

Now, given the nature of money and inequality, I will be very interested to see how people react when someone makes the point that people's perceptions of fair living standards are extremely relative, but hierarchy is forever, and the only thing accomplished by free trade fundamentalism is to expand the game across borders and deny government any legitimate prerogative to regulate the thing in accordance with public perceptions of justice.